PANHANDLE OIL AND GAS INC. Reports Second Quarter And Six Months 2013 Results And Mid-Year Reserve Update

Company Increases Second Quarter Net Income 51% and Increases Mcfe Production 22%

May 08, 2013, 06:00 ET from PANHANDLE OIL AND GAS INC.

OKLAHOMA CITY, May 8, 2013 /PRNewswire/ -- PANHANDLE OIL AND GAS INC. (NYSE: PHX) today reported financial and operating results for the Company's fiscal second quarter and six months ended March 31, 2013. 

HIGHLIGHTS FOR THE PERIODS ENDED MARCH 31, 2013

  • Recorded a second quarter 2013 net income of $1,022,487, $.12 per share, as compared to $675,966, $.08 per share, for the 2012 quarter.
  • Generated cash from operating activities of $15,434,819 for the 2013 six-month period, well in excess of $12,719,947 of capital expenditures for drilling and equipping wells.
  • Reported 2013 second quarter and six-month production of 3,245,411 Mcfe and 6,253,776 Mcfe, respectively, which were increases of 22% and 20%, respectively, over the same periods of fiscal 2012.
  • Continued to significantly increase oil production, 72% and 45% for the quarter and six months, respectively, as compared to the same 2012 periods.
  • Increased proved reserves 3% to 128.1 Bcfe at March 31, 2013, from 124.7 Bcfe at Sept. 30, 2012.
  • Continued to receive a large number of oil and natural gas liquids (NGL) rich well proposals on mineral acreage, with 2013 drilling commitments thus far well ahead of fiscal 2012.

FISCAL SECOND QUARTER 2013 RESULTS

For the 2013 second quarter, the Company recorded net income of $1,022,487, or $.12 per share.  This compared to net income of $675,966, or $.08 per share, for the 2012 second quarter.  Net cash provided by operating activities increased 13% to $8,276,576 for the 2013 second quarter versus the 2012 second quarter.  Cash flow from operations fully funded costs to drill and equip wells for the quarter.  Capital expenditures for the 2013 quarter totaled $5,855,548.  Capital expenditures thus far in fiscal 2013 are 75% directed toward oil and NGL rich plays, principally in Western and South Central Oklahoma and the Texas Panhandle.  The 2013 quarter included a $2 million unrealized loss on derivative contracts.  This compared to a $.6 million unrealized gain for the 2012 period.  The Company principally uses derivative contracts of less than one year duration to provide protection against significant declines in cash flows from fluctuations in the price of natural gas and, to a lesser extent, oil.  The Company typically will hedge around 50% - 60% of its expected production volumes.

Total revenues for the 2013 second quarter were $12,581,986, increasing 21% from $10,436,910 for the 2012 quarter.  Oil and gas sales increased $4,534,946, or 47% in the 2013 quarter, as compared to the 2012 quarter, as a result of a 22% increase in Mcfe production and a 21% increase in the average per Mcfe sales price.  The average sales price per Mcfe of production during the 2013 second quarter was $4.34, a significant increase from $3.60 for the 2012 second quarter.

Oil production increased 72% in the 2013 quarter to 52,567 barrels versus 30,614 barrels in the 2012 quarter, and gas production increased 475,072 Mcf to 2,778,869 Mcf, a 21% increase from the 2012 quarter.  Gas production volume increases are principally attributable to the development of Panhandle's Fayetteville Shale properties.  Drilling expenditures over the last 18 months in the oil plays mentioned above are responsible for the increased oil volumes.  In addition, 25,190 barrels of NGL were sold in the quarter.

SIX MONTHS 2013 RESULTS

For the 2013 six months, the Company recorded net income of $3,170,785, or $.38 per share.  This compared to net income of $4,088,076, or $.49 per share, for the 2012 six months.  Net cash provided by operating activities increased 2% to $15,434,819 for the 2013 six months versus the 2012 six months.  Again, cash flow from operations fully funded costs to drill and equip wells for the six months.  Capital expenditures for the 2013 six months totaled $13,049,947, which included $12,719,947 for drilling and equipping wells.  The 2013 six months included a $1.1 million unrealized loss on derivative contracts.  This compared to a $.1 million unrealized gain for the 2012 period. 

Total revenues for the 2013 six months were $26,762,421, increasing 12% from $23,841,243 for the 2012 six months.  The 2012 six months revenues included lease bonuses and rentals of $1,921,918, as compared to only $515,333 in the 2013 six months.  Oil and gas sales increased $5,549,623 or 26% in the 2013 six months, compared to the 2012 six months, as a result of a 20% increase in Mcfe production and a 5% increase in the average per Mcfe sales price.  The average sales price per Mcfe of production during the 2013 six months was $4.29 compared to $4.09 for the 2012 six months.

Oil production increased 45% in the 2013 six months to 99,223 barrels from 68,654 barrels in the 2012 six months, and gas production increased 776,145 Mcf, or 17%, compared to the 2012 six months.  Gas production volume increases are principally attributable to the development of the Company's Fayetteville Shale properties.  Drilling expenditures over the last 18 months targeting the oil and NGL rich plays are responsible for the increased oil volumes.  In addition, 55,864 barrels of NGL were sold in the six months.

RESERVES UPDATE

March 31, 2013, mid-year proved reserves were 128.1 Bcfe, as calculated by the Company's consulting petroleum engineering firm, DeGolyer and MacNaughton.  This was an increase of 3%, compared to the 124.7 Bcfe of proved reserves at Sept. 30, 2012.  SEC prices used for the March 31, 2013, report averaged $2.66 per Mcf for natural gas, $87.19 per barrel for oil and $29.54 per barrel for NGL compared to $2.51 per Mcf for natural gas, $89.41 per barrel for oil and $35.70 per barrel for NGL for the Sept. 30, 2012, report.  The above prices reflect net at the wellhead prices.  Total proved developed reserves increased 4% to 77.1 Bcfe and proved undeveloped reserves increased to 51.1 Bcfe, as compared to Sept. 30, 2012, reserve volumes.

MANAGEMENT COMMENTS

Michael C. Coffman, President and CEO said, "We continue to be very encouraged by our financial and operating results in fiscal 2013.  Significant oil production growth continues to result from our capital expenditures for drilling in Western Oklahoma, South Central Oklahoma and the Texas Panhandle.  At today's price differentials for oil as compared to dry natural gas, this increasing oil production will continue to increase our revenue stream."

Coffman continued: "In addition, the recent significant increase in natural gas prices, to a $4.00 per Mcf level will add significantly to our revenue stream.  As approximately 85% of our production, on an Mcfe basis, is currently natural gas, these prices, if they hold, will significantly increase our revenues and cash flow over the coming quarters.  We continue to fund our drilling capital expenditures from cash flow allowing Panhandle to maintain its very low debt position and keep the Company focused on executing strategies to increase shareholder value.  We are in the enviable position of not having our focus distracted by needing to raise capital to finance our capital investments."

OPERATIONS UPDATE

Paul Blanchard, Senior Vice President and COO said, "The Company's focus is adding meaningful shareholder value by reinvesting our cash flow in the highest rate of return drilling projects.  Our prime opportunities for investments are currently on our mineral holdings in Western Oklahoma, South Central Oklahoma and the Texas Panhandle, where we have virtually no cost of entry.  Drilling projects in these areas are the highest quality we have experienced in the last few years as our operating partners are moving from reservoir delineation to development drilling in the Marmaton, Cleveland, Granite Wash, Hogshooter Wash, Woodford Shale and Tonkawa.  Success in this drilling has driven the material increases in our oil production and reserves.  In addition to the oil production growth, our proven oil reserves grew by 35%, as compared to year-end 2012.  Proven oil reserves currently stand at 1,444 Mbo.  It is noteworthy that this growth was achieved strictly through reinvestment of cash flow.  With the current activity and inventory of high quality drilling locations in these areas, we anticipate continued growth in oil production and reserves.  At the same time, we have also made sufficient investments in gas drilling to achieve record gas production.  This increasing oil and natural gas production, combined with improving gas prices, should result in material value generation for our shareholders."

OPERATING HIGHLIGHTS

Second Quarter

Second Quarter

Six Months

Six Months

Ended

Ended

Ended

Ended

March 31, 2013

March 31, 2012

March 31, 2013

March 31, 2012

Mcfe Sold

3,245,411

2,654,485

6,253,776

5,214,009

Average Sales Price per Mcfe

$4.34

$3.60

$4.29

$4.09

Oil Barrels Sold

52,567

30,614

99,223

68,654

Average Sales Price per Barrel

$87.90

$97.55

$86.00

$93.03

Mcf Sold

2,778,869

2,303,797

5,323,254

4,547,109

Average Sales Price per Mcf

$3.19

$2.39

$3.15

$2.91

NGL Barrels Sold

25,190

27,834

55,864

42,496

Average Sales Price per Barrel

$24.91

$38.92

$27.87

$39.31

Quarterly Production Levels

Quarter ended

Oil Bbls Sold

Mcf Sold

NGL Bbls Sold

Mcfe Sold

3/31/2013

52,567

2,778,869

25,190

3,245,411

12/31/2012

46,656

2,544,385

30,674

3,008,365

9/30/2012

45,552

2,251,540

32,538

2,720,080

6/30/2012

38,937

2,273,649

23,680

2,649,351

3/31/2012

30,614

2,303,797

27,834

2,654,485

The Company's derivative contracts in place for natural gas at March 31, 2013, are outlined in its Form 10-Q for the period ending March 31, 2013.

 

Proved Reserves

SEC Pricing

March 31, 2013

Sept. 30, 2012

Proved Developed Reserves:

(unaudited)

Barrels of NGL

607,466

494,160

Barrels of Oil

920,836

849,548

Mcf of Gas

67,891,602

65,733,119

Mcfe (1)

77,061,414

73,795,367

Proved Undeveloped Reserves:

Barrels of NGL

631,630

294,582

Barrels of Oil

522,800

222,771

Mcf of Gas

44,130,470

47,780,937

Mcfe (1)

51,057,050

50,885,055

Total Proved Reserves:

Barrels of NGL

1,239,096

788,742

Barrels of Oil

1,443,636

1,072,319

Mcf of Gas

112,022,072

113,514,056

Mcfe (1)

128,118,464

124,680,422

10% Discounted Estimated Future

Net Cash Flows (before income taxes):

Proved Developed

$92,893,767

$87,587,058

Proved Undeveloped

37,111,374

27,151,132

Total

$130,005,141

$114,738,190

SEC Pricing

Oil/Barrel

$87.19

$89.41

Gas/Mcf

$2.66

$2.51

NGL/Barrel

$29.54

$35.70

(1) Crude oil and NGL converted to natural gas on a one barrel of crude oil or NGL equals six Mcf of natural gas basis

FINANCIAL HIGHLIGHTS

Statements of Operations

Three Months Ended March 31,

Six Months Ended March 31,

2013

2012

2013

2012

Revenues:

 (unaudited) 

 (unaudited) 

Oil, NGL and natural gas sales

$ 14,100,844

$ 9,565,898

$ 26,859,798

$ 21,310,175

Lease bonuses and rentals

140,941

166,727

515,333

1,921,918

Gains (losses) on derivative contracts

(1,811,359)

590,912

(918,666)

368,833

Income from partnerships

151,560

113,373

305,956

240,317

12,581,986

10,436,910

26,762,421

23,841,243

Costs and expenses:

Lease operating expenses

2,638,342

2,051,487

5,934,904

4,316,399

Production taxes

412,886

343,852

716,439

782,351

Exploration costs

15,412

41,688

35,179

355,058

Depreciation, depletion and amortization

6,258,623

4,940,961

11,897,643

9,083,374

Provision for impairment

63,476

217,262

218,441

580,809

Loss (gain) on asset sales, interest and other

(211,896)

29,537

(168,710)

(47,504)

General and administrative

1,643,656

1,606,157

3,541,740

3,303,680

10,820,499

9,230,944

22,175,636

18,374,167

Income before provision for income taxes

1,761,487

1,205,966

4,586,785

5,467,076

Provision for income taxes

739,000

530,000

1,416,000

1,379,000

Net income

$   1,022,487

$    675,966

$   3,170,785

$   4,088,076

Basic and diluted earnings per common share

$            0.12

$          0.08

$            0.38

$            0.49

Basic and diluted weighted average shares outstanding:

Common shares

8,254,226

8,249,954

8,252,145

8,253,079

Unissued, directors' deferred compensation shares

113,258

133,851

113,045

133,387

8,367,484

8,383,805

8,365,190

8,386,466

Dividends declared per share of    common stock and paid in period

$            0.07

$          0.07

$            0.14

$            0.14

Balance Sheets

March 31, 2013

Sept. 30, 2012

Assets

(unaudited)

Current assets:

Cash and cash equivalents

$          2,316,752

$          1,984,099

Oil, NGL and natural gas sales receivables

10,520,413

8,349,865

Deferred income taxes

94,900

121,900

Refundable income taxes

443,601

325,715

Refundable production taxes

578,792

585,454

Other

165,535

255,812

Total current assets

14,119,993

11,622,845

Properties and equipment, at cost, based on

   successful efforts accounting:

Producing oil and natural gas properties

289,205,728

275,997,569

Non-producing oil and natural gas properties

9,210,116

10,150,561

Furniture and fixtures

705,036

668,004

299,120,880

286,816,134

Less accumulated depreciation, depletion and amortization

(176,880,302)

(165,199,079)

Net properties and equipment

122,240,578

121,617,055

Investments

1,369,755

1,034,870

Derivative contracts

19,912

-

Refundable production taxes

680,939

911,960

Total assets

$      138,431,177

$      135,186,730

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$          7,082,555

$          6,447,692

Derivative contracts

1,279,626

172,271

Accrued liabilities and other

700,366

1,007,779

Total current liabilities

9,062,547

7,627,742

Long-term debt

13,500,000

14,874,985

Deferred income taxes

27,638,907

26,708,907

Asset retirement obligations

2,262,211

2,122,950

Stockholders' equity:

Class A voting common stock, $.0166 par value;

24,000,000 shares authorized, 8,431,502 issued at     March 31, 2013, and Sept. 30, 2012

140,524

140,524

Capital in excess of par value

2,337,589

2,020,229

Deferred directors' compensation

2,580,217

2,676,160

Retained earnings

86,828,002

84,821,395

91,886,332

89,658,308

Less treasury stock, at cost; 187,005 shares at March 31,

2013, and 181,310 shares at Sept. 30, 2012

(5,918,820)

(5,806,162)

Total stockholders' equity

85,967,512

83,852,146

Total liabilities and stockholders' equity

$      138,431,177

$      135,186,730

 

Condensed Statements of Cash Flows

Six months ended March 31,

2013

2012

Operating Activities

(unaudited)

Net income

$   3,170,785

$   4,088,076

Adjustments to reconcile net income to net cash provided

  by operating activities:

Depreciation, depletion and amortization

11,897,643

9,083,374

Impairment

218,441

580,809

Provision for deferred income taxes

957,000

358,743

Exploration costs

35,179

355,058

Gain from leasing of fee mineral acreage

(514,326)

(1,922,690)

Net gain on sale of assets

(208,750)

(119,647)

Income from partnerships

(305,956)

(240,317)

Distributions received from partnerships

389,962

290,861

Directors' deferred compensation expense

201,197

216,724

Restricted stock awards

399,907

148,793

Cash provided by changes in assets and liabilities:

Oil and natural gas sales receivables

(2,170,548)

1,861,278

Fair value of derivative contracts

1,087,443

(93,718)

Refundable production taxes

237,683

72,573

Other current assets

37,971

(48,078)

Accounts payable

426,487

100,827

Income taxes receivable

(117,886)

354,246

Other non-current assets

-

308

Income taxes payable

-

283,863

Accrued liabilities

(307,413)

(309,323)

Total adjustments

12,264,034

10,973,684

Net cash provided by operating activities

15,434,819

15,061,760

Investing Activities

Capital expenditures, including dry hole costs

(12,719,947)

(12,074,991)

Acquisition of working interest properties

-

(17,399,052)

Acquisition of minerals and overrides

(330,000)

(1,443,893)

Proceeds from leasing of fee mineral acreage

527,570

1,978,410

Investments in partnerships

(418,891)

(206,376)

Proceeds from sales of assets

870,610

131,693

Excess tax benefit on stock-based compensation

15,000

75,257

Net cash used in investing activities

(12,055,658)

(28,938,952)

Financing Activities

Borrowings under debt agreement

4,181,199

32,458,470

Payments of loan principal

(5,556,184)

(18,648,969)

Purchase of treasury stock

(507,345)

(1,158,957)

Payments of dividends

(1,164,178)

(1,160,675)

Net cash provided by (used in) financing activities

(3,046,508)

11,489,869

Increase (decrease) in cash and cash equivalents

332,653

(2,387,323)

Cash and cash equivalents at beginning of period

1,984,099

3,506,999

Cash and cash equivalents at end of period

$   2,316,752

$   1,119,676

Supplemental Schedule of Noncash Investing and Financing Activities

Additions to asset retirement obligations

$        78,706

$        35,816

Gross additions to properties and equipment

$ 13,310,629

$ 29,559,055

Net (increase) decrease in accounts payable for properties       and equipment additions

(260,682)

1,358,881

Capital expenditures and acquisitions, including dry hole costs

$ 13,049,947

$ 30,917,936

Panhandle Oil and Gas Inc. (NYSE-PHX) is engaged in the exploration for and production of natural gas and oil.  Additional information on the Company can be found at www.panhandleoilandgas.com.

Forward-Looking Statements and Risk Factors This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements include current expectations or forecasts of future events.  They may include estimates of oil and gas reserves, expected oil and gas production and future expenses, projections of future oil and gas prices, planned capital expenditures for drilling, leasehold acquisitions and seismic data, statements concerning anticipated cash flow and liquidity and Panhandle's strategy and other plans and objectives for future operations.  Although Panhandle believes the expectations reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct.  They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties.  Factors that could cause actual results to differ materially from expected results are described under "Risk Factors" in Part 1, Item 1 of Panhandle's 2012 Form 10-K filed with the Securities and Exchange Commission.  These "Risk Factors" include the worldwide economic recession's continuing negative effects on the natural gas business; our hedging activities may reduce the realized prices received for natural gas sales; the volatility of oil and gas prices; Panhandle's ability to compete effectively against strong independent oil and gas companies and majors; the availability of capital on an economic basis to fund reserve replacement costs; Panhandle's ability to replace reserves and sustain production; uncertainties inherent in estimating quantities of oil and gas reserves and projecting future rates of production and the amount and timing of development expenditures; uncertainties in evaluating oil and gas reserves; unsuccessful exploration and development drilling; decreases in the values of our oil and gas properties resulting in write-downs; the negative impact lower oil and gas prices could have on our ability to borrow; drilling and operating risks; and we cannot control activities on our properties as the Company is a non-operator.

Do not place undue reliance on these forward-looking statements, which speak only as of the date of this release, and Panhandle undertakes no obligation to update this information.  Panhandle urges you to carefully review and consider the disclosures made in this presentation and Panhandle's filings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect Panhandle's business.

SOURCE PANHANDLE OIL AND GAS INC.



RELATED LINKS

http://www.panhandleoilandgas.com